Lloyds Banking Group (LLOY) Strategy Update summary

Strategic priorities and business overview

• Business and Commercial Banking (BCB) is a core, highly profitable segment, contributing around 15% of group net income and over 20% return on tangible equity in 2023.

• BCB serves over 1.1 million clients, holds a 20% SME relationship share, manages £33bn in loans and £77bn in deposits as of FY 2023.

• The strategy centers on digitising and diversifying BCB, deepening customer relationships, expanding into valuable sectors, and leveraging group synergies.

• BCB aims to deliver £0.3bn of the group’s £1.5bn strategic revenue target by 2026, with significant upside from core franchise growth and market share gains.

• Strategic priorities include scaling digital origination, personalising customer experiences, and transforming operations to drive efficiency and returns.

Market context and growth opportunities

• SMEs supported by BCB account for 60% of UK jobs and over 50% of private sector turnover, making BCB vital to the UK economy.

• Despite recent market challenges, BCB has remained resilient and accretive, with business confidence now at an eight-year high.

• The lending book is diversified and resilient, with 90% of SME lending secured and an average real estate LTV of 45%.

• There is headroom for growth, especially in corporates with turnover above £25 million and sectors like manufacturing.

• BCB covers a broad range of customer segments, from small businesses to mid-corporates, with regional and sector expertise across the UK.

Digital transformation and customer engagement

• Around 85% of BCB customers are digitally active, with a 30% growth in mobile active customers and a 10% increase in monthly mobile logins per customer.

• Digitalization initiatives have automated 60% of lending decisions in Business Banking, doubling gross new lending year-on-year.

• Digital origination and servicing have reduced onboarding times by up to 15x and improved merchant services conversion by 15%.

• Targeting over 50% of products to be digitally originated and fulfilled by end-2024, with 45% of servicing journeys already digitized.

• Personalisation strategies, including real-time content and GenAI, have increased digital engagement sixfold and product conversion rates fivefold since 2021.